Reading 2-IV: Standards of Professional Conduct & Guidance: Duties to Employers

LOS A.: Loyalty

1、Grant Starks, CFA, has been working for Advisors, Inc., for eight years. Starks is about to start his own money management business and has given his two-week notice of his resignation. A few days before his resignation takes effect, a current client of Advisors calls him at his office to inquire about some services for her account at Advisors. During the conversation, Starks tells the client that his new business will have lower commissions than Advisors. Starks has most likely violated:

A)   Standard VI(B), Priority of Transactions, by violating the priority of transactions.

B)   none of these Standards.

C)   Standard V(B), Communication with Clients and Prospective Clients, by talking of commissions that are not yet in effect.

D)   Standard IV(A), Loyalty to Employer, by competing with his current employer.

The correct answer was D)

This is a breach of loyalty to his current employer. By telling a current client of his employer about the lower commissions he will charge in his new business, Starks is placing himself in direct competition with Advisors, and this is a violation of Standard IV(A).

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